January 10, 2024
A warm welcome to all new subscribers. The mid-week updates are here to supplement and inform us of any new developments which we haven’t covered on Monday’s ATW or Friday’s charts. This also includes any alerts that might have been triggered during the week, as well as looking at any other interesting setups.
First a little quiz question for you:
Which bond market do you think has reached the yield levels of the Covid-panic of March/April 2020?
It’s China, where 10-year yields are approaching the levels from roughly four years ago. We will get the Chinese CPI this Friday, which will likely confirm a third month of deflation. This will further embolden bullish rate expressions in the near term. Bloomberg survey shows all six contributors looking for a rate cut on January 15, ranging from 10 to 60bps. As we know, credit pricing isn’t the problem; it is really credit demand, which will unlikely react due to further rate cuts.
Chinese Stocks (below the CSI 100) are still in a 2-year downtrend from the highs they recorded in 2021. We are now hitting the Bollinger bands and are approaching levels last seen in 2016. Aside from liquidity and easy monetary stimulus, credit creation needs to be fixed first, which is a steep hill to climb.
Let’s now dig into what else has been flashing up and needs our attention as we look into the second half of the week. But first, let me share my thoughts on the recent speculation around QT tapering.